5 Stocks Under $5 With Impressive Profitability

Because there are so many different ways to look at a company’s profitability, it can seem like a difficult task. One idea is to compare a company’s profitability margins to its industry peers. Companies with higher margins are taking a greater percentage of sales as profits, and they also have tighter control over their cost structure.

We ran a screen on stocks trading under $5 for those with impressive profitability, beating their industry peers on gross, operating, and pretax margins.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

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We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

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Do you think these companies have strong profitability? Use this list as a starting point for your own analysis.

List sorted by difference between gross margin and industry.

1. Transportadora de Gas Del Sur S.A. (NYSE:TGS): Engages in the transportation of natural gas, as well as production and commercialization of natural gas liquids primarily in Argentina. Market cap of $463.99M. Price (as of market close 12/5) at $2.92. TTM gross margin at 35.02% vs. industry gross margin at 21.94%. TTM operating margin at 22.22% vs. industry operating margin at 13.52%. TTM pretax margin at 18.39% vs. industry pretax margin at 11.04%. It's been a rough couple of days for the stock, losing 5.81% over the last week.

2. Yongye International, Inc. (NASDAQ:YONG): Engages in the research, development, manufacture, and sale of fulvic acid based liquid and powder nutrient compounds for plants and animals, which are used in the agriculture industry in the People's Republic of China. Market cap of $217.83M. Price (as of market close 12/5) at $4.31. TTM gross margin at 59.98% vs. industry gross margin at 37.88%. TTM operating margin at 31.30% vs. industry operating margin at 17.38%. TTM pretax margin at 31.62% vs. industry pretax margin at 16.18%. The stock is a short squeeze candidate, with a short float at 8.91% (equivalent to 11.92 days of average volume). The stock has lost 44.03% over the last year.

3. Zix Corporation (NASDAQ:ZIXI): Provides Internet-based applications in software as a service model that enables the use of secure email for sensitive information exchange primarily in the healthcare, financial services, insurance, and government sectors in the United States. Market cap of $181.50M. Price (as of market close 12/5) at $2.75. TTM gross margin at 84.59% vs. industry gross margin at 68.70%. TTM operating margin at 25.23% vs. industry operating margin at 24.93%. TTM pretax margin at 25.45% vs. industry pretax margin at 15.43%. The stock is a short squeeze candidate, with a short float at 8.29% (equivalent to 10.24 days of average volume). The stock has lost 29.31% over the last year.

4. Pzena Investment Management, Inc (NYSE:PZN): A publicly owned investment manager. The firm also provides investment advisory services to funds. Market cap of $311.87M. Price (as of market close 12/5) at $4.83. TTM gross margin at 53.28% vs. industry gross margin at 46.09%. TTM operating margin at 52.79% vs. industry operating margin at 36.79%. TTM pretax margin at 47.63% vs. industry pretax margin at 26.54%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.76). The stock has had a couple of great days, gaining 27.44% over the last week.

5. China Green Agriculture, Inc. (NYSE:CGA): Engages in the research, development, manufacture, distribution, and sale of humic acid based compound fertilizers in China. Market cap of $88.36M. Price (as of market close 12/5) at $3.28. TTM gross margin at 38.60% vs. industry gross margin at 37.88%. TTM operating margin at 23.59% vs. industry operating margin at 17.38%. TTM pretax margin at 23.34% vs. industry pretax margin at 16.18%. The stock is a short squeeze candidate, with a short float at 10.02% (equivalent to 10.51 days of average volume). The stock has performed poorly over the last month, losing 17.59%.

*Profitability data sourced from Fidelity, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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